Why SMEs Need To Be Strategic

Why SMEs Need To Be Strategic

The majority of Small and Medium-sized Enterprises (SMEs – firms with 200 or less employees) do not engage in strategic planning. This is despite plenty of evidence for its effectiveness in increasing competitiveness and long-term survival. Large corporations understand the benefits of designing strategies to improve performance, so why do SMEs hold back?

What drives SMEs?

Many suggest that SMEs face barriers to strategic planning, in the form of time constraints, a lack of experience, or a reluctance to share ideas. However, Australian researchers have approached the issue from a different angle.

small business optometrist SMEs

Wang et al. suggest that SMEs tend to associate strategic planning with profit-seeking attitudes, whereas many owners of SMEs have personal, non-economic goals. These might be autonomy or independence, flexibility and lifestyle – motivations which are closely linked to the personal lives of owners.

Yet strategy isn’t just about planning for profits. Strategic planning can help SMEs adjust to a changing market, reduce pressure or stress on key individuals, upgrade technology, prepare for succession or selling, and so much more.

Strategic SMEs

Small & Medium enterprises make up the largest business sector in every world economy and are key drivers of economic growth and employment. They are key to the Australian Government’s Innovation Agenda, in recognition of the role that SMEs play in contributing over 50% of technological innovation with only 20% of R&D expenditure.

The high failure rates of SMEs, particularly in their first years, is supported by statistics. A little-known fact is that SMEs that engage in strategic planning are less likely to fail.

So how can SMEs embrace strategic thinking?

By approaching strategic planning from the perspective of values.

Again, corporations have embraced values to drive their strategies, but it perfectly suits the needs of SMEs, too. Values provide a business and its stakeholders a reference for what the company considers desirable, important, beneficial, and constructive. Values influence the choices made by the business owners and management, and are integrated into strategies.

Keep strategic planning simple and create a document that guides future planning, rather than a schedule of tasks to be achieved over 3 years.

Learn how to design a simple strategic planning document here, or contact Spindle for tailored advice for designing strategies specifically for Small & Medium-sized Enterprises.


closer look at strategy